Contract documents

Contract documents
See also
Outsourcing - change of agreement Mutual agreement Executed agreement Service Level Agreement Assignment of claims Negotiation style Termination for convenience Compromise Binding contract

Contract documents are written obligation which are interpreted by the terms and content contained in contract. Understanding of contractual obligations will greatly depend on the clarity of documents in translating needs and implied requirements. Without proper understanding of the contract, it can lead to different interpretation, which may result in unnecessary contractual problems such as disputes.

The contractual obligation of each party in any contract will be doubtful if understanding the terms and interpretations of the content contained in the order documents is not fully appreciated. The contract documents drawn up for each contract should meet the intended roles of references and guidelines for relations between the contracting parties throughout the entire project.

Misunderstanding of contract documents

The factors of the contractual language and its judicial interpretation can lead to the problem of understanding the needs of the contract, which can lead to misunderstanding and misinterpretation of the facts in contract agreements. This kind of situation can predominate an opportunistic side of the deal in order to take the unfair advantage of another party. Thus, appropriate understanding of the agreement is necessary.

In order to understand the conditions of the contract both parties have to understand the content of documents as well as the spirit of contractual relations. Contracts supposed to be created and signed on the fair basis on which the parties agree to fulfill their obligations to meet each other's needs and requirements.

Perception of contract documents

Businessman's generally understands contracts as legal documents which are developed by lawyers in order to protect businesses from risks and prepare them for the worst possible litigation scenario. In the extreme cases contracts can be seen as a necessary evil. If the company has this point of view contract can be perceivable as a burden or a barrier.

More and more changes in the market as well as necessity of extended cooperation in business makes both parties have to demands pressure on common interests, elasticity and joint risks. In the long run, organisation and coordination of the business process get more important and the project can demands continuous and systematic documentation of the process. Partnership and alliances are good examples of a strong need to find common interests for both sides and where the processes of all parties are closely interlinked.

Although the contract literature is diverse, there is still lack of comprehensive contract theory. Contract theories have a tendency to study various aspects of the contracting. There are mainly two research schools that criticises the stiffness of the contract law and contract research. One of them approaches the contract law agreements perspective and criticises the non-elastic nature of the law of commitment. The other approach criticises the rigidity of neoclassical economics. Even though sometimes both schools share elements and affect each other, they exist separately. Combination of these two approaches is rare.

Hard and soft terms of the contract

Hard elements of the contract

• Economic inevitability.
• Maximising profits.
• Cost savings.

Soft elements of the contract

• Flexibility.
• Taking into account partners for mutual benefits.
• Soft contract elements allows you to manage uncertainties, increase flexibility and the ability to adapt to contracts and the process of concluding contracts.
• Soft contracts complements the ability to contract companies.

Changing market conditions may demand soft terms in contracts. A common innovation is an example of a situation where hard and soft terms can be contrasted. The parties in the joint innovation project can not only predict common objectives, but also forecast the actual outcome of the uncertainty and the limit of the rights resulting from the results which appear to be unclear. If there are contracts written on hard and unchangeable conditions, the contract cannot be complete due to the no specification.

References

• Clack C., Bakshi V., Lee B. (2016)., Smart contract templates: foundations, design landscape and research directions
• Mohamad A. (2006)., Understanding contract documentation Proceedings of the 6th Asia-Pacific structural engineering and construction conference (APSEC 2006), 5 – 6 September 2006, Kuala Lumpur, p. 12
• Nystén‐Haarala S. (2010)., Flexibility in contract terms and contracting processes, International Journal of Managing Projects in Business, Vol. 3 Issue: 3, pp.462-478
• Passera S., Haapio H., Vaasa, Barton T. (2013).,Innovating contract practices: Merging contract design with information design , California western school of law CWSL scholarly commons

Footnotes

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Author: Maciej Michałek